Debt servicing outpaces development, health budgets

Namibia is shelling out around N$68.7 billion for debt-servicing interest payments from the 2021/22 financial year through the 2026/27 budget year, a run of costs government says is eating into what it can spend on development projects.

Calculations show that for every dollar directed toward infrastructure and capital projects, nearly another dollar was required to service existing debt obligations.

Over the four years from 2021/22 to 2024/25, development budgets totalled roughly N$30.3 billion, compared with N$40.7 billion in interest payments over the same period.

The difference – more than N$10 billion – illustrates the structural constraint facing Namibia’s fiscal framework, where statutory debt costs have consistently outpaced investment in development.

Available figures show that the totals come to N$8.5 billion (2021/22), N$9.2 billion (2022/23), N$10.2 billion (2023/24), N$12.8 billion (2024/25), N$13.7 billion (2025/26) and N$14.3 billion (2026/27), adding up to N$68.7 billion.

Across those years, debt servicing has consistently ranked among the largest single claims on the budget. In 2021/22, interest payments of N$8.5 billion sat behind education (N$13.8 billion) and ahead of health (N$8.1 billion).

The pattern persists in later years, with education allocations staying above interest costs and health allocations typically below them.

In 2025/26, interest is budgeted at N$13.7 billion compared with education’s N$24.8 billion and health’s N$12.3 billion, while in 2026/27, interest is projected at N$14.3 billion and health at N$13.1 billion.

Over the same six-year period, allocations to education amount to a combined N$115.9 billion.

This comprises N$13.8 billion (2021/22), N$14.1 billion (2022/23), N$16.8 billion (2023/24), N$18.4 billion (2024/25), N$24.8 billion (2025/26) and N$28.0 billion (2026/27).

Health allocations over the period total N$62.5 billion, made up of N$8.1 billion, N$8.4 billion, N$9.7 billion, N$10.9 billion, N$12.3 billion and N$13.1 billion, respectively.

This places cumulative interest payments of N$68.7 billion above total health spending over the same period and second only to education allocations among the three categories.

No room for development

Development spending over the past five financial years has consistently trailed interest payments on public debt. In FY2021/22, the development budget stood at approximately N$5.6 billion, while interest payments amounted to N$8.5 billion.

That meant Namibia paid nearly N$3 billion more in debt interest than it invested in capital projects that year.

The pattern continued in FY2022/23, when the development budget was initially set at N$5.0 billion and later revised to N$5.5 billion.

In contrast, interest payments rose to N$9.2 billion, exceeding development spending by roughly N$3.7 to N$4.2 billion. Once again, more money went toward servicing past borrowing than toward building new infrastructure.

In FY2023/24, development allocations increased to about N$6.5 billion, reflecting gradual efforts to strengthen capital expenditure.

However, interest payments climbed further to N$10.2 billion, maintaining a gap of roughly N$3.7 billion between debt servicing and development investment.

A notable shift occurred in FY2024/25, when the development budget rose sharply to N$12.7 billion, a 58% increase from the previous year.

This brought development spending close to the N$12.8 billion allocated for interest payments in the same year.

While the two figures approached parity, the near-equal allocation underscores the scale of debt-servicing pressure.

Concerns

Finance Minister Erica Shafudah has explicitly warned that debt servicing is crowding out growth-focused spending.

“We remain concerned that we expend more resources on debt servicing than we plough back into the economy to grow our economic potential through the development budget.

"As such, there is a need for continued measures to contain the pace of debt accumulation so as to curb the rising debt servicing costs," she said while presenting the 2024/25 budget.

This year, Shafudah also said government would need to borrow about N$15 billion to meet all obligations.

The biggest chunk, she said, is swallowed up by operational costs, leaving just N$6.5 billion for development.

Former finance minister Ipumbu Shiimi also raised concerns about rising debt stock when he presented the mid-term budget in November 2023, saying that, if unchecked, loans would soon take priority over key social expenses.

“Interest payments are revised upwards by N$1.7 billion to N$11.8 billion in the 2023/24 fiscal year, equivalent to 15% of projected revenue for the year," he said.

“Debt servicing costs continue to absorb an increasing portion of the resource envelope, now exceeding expenditure on key social services such as health and social protection."

Economists, including Cirrus Capital co-founder Rowland Brown, have been warning about the government's borrowing for years.

About eight years ago, Rowland warned that government debt had grown to unsustainable levels and that it would not be able to borrow at the same rates as previously.

Although Brown acknowledged that the economy had grown since 1990, he said much of this growth was driven by debt, which is not sustainable in the long term.

Former finance minister Calle Schlettwein told The Namibian last week: "You cannot grow an economy if the basic infrastructure is missing, including power, water and internet provision.”